FB Financial (FBK): A Strategic Dip to Buy Into Tangible Value

FB Financial (NASDAQ: FBK) has faced near-term headwinds following its Q2 2025 earnings report, with shares dipping to $45.44—a 12% pullback from its 52-week high. While the reported GAAP EPS of $0.06 fell far short of expectations, the adjusted EPS of $0.88 underscored a more nuanced story. Beneath the headline numbers lies a compelling narrative of strategic balance sheet repositioning, merger synergies, and tangible book value (TBVPS) growth that positions FBK as a buy for investors focused on long-term capital strength and margin expansion.

The Earnings Miss: A One-Time Catalyst, Not a Structural Issue

The GAAP net loss stemmed from a $60.5 million non-cash charge tied to the sale of $266.5 million in low-yielding securities—a move to reposition the balance sheet for higher-yield loans. This decision, while dilutive to short-term earnings, aligns with the company's stated goal of boosting net interest margins (NIM). The NIM improved to 3.68% in Q2, up 13 basis points year-over-year, driven by disciplined pricing on deposits and rising loan yields.

Historically, such earnings misses have not deterred FBK's short-term performance. Backtest results from 2022 to present show that following earnings misses, FBK's stock had a 50% win rate over 3, 10, and 30 days, suggesting resilience in the face of near-term headwinds. This consistency reinforces the thesis that the current dip is a buying opportunity, not a sign of structural weakness.

Tangible Book Value: The Undervaluation Case

The key metric to watch here is TBVPS, which rose to $29.78 per share in Q2—up 9% from Q1 and 11% from a year ago. This growth reflects strong capital management:
- Merger synergies: The July 1 completion of the Southern States Bancshares acquisition added $2.87 billion in assets, boosting FBK's scale to $16.0 billion in total assets.
- Share repurchases: FBK bought back 811,704 shares in Q2, reducing dilution and elevating equity per share.
- Efficiency gains: The core efficiency ratio improved to 56.9%, down from 59.9% in Q1, as Southern States' lean operations reduced redundancies.

At $45.44, FBK trades at a 1.5x TBVPS multiple, a significant discount to its five-year average of 1.75x. This gap suggests the market is underpricing the merger's long-term benefits.

Integration Catalysts: Unlocking Southern States' Value

The Southern States merger is the linchpin for future growth. Key milestones to watch:
1. System conversions: Completing by Q3 2025 will eliminate IT redundancies, saving an estimated $10–15 million annually in operating costs.
2. Loan growth: Southern States' $2.32 billion in loans (primarily in high-margin commercial real estate) will bolster FBK's loan portfolio, which grew 6% year-over-year to $9.87 billion.
3. Deposit stability: Combined deposits of $13.87 billion (post-merger) provide ample liquidity, with deposit costs down to 2.48%—a competitive advantage in a rising-rate environment.

Risks and Near-Term Volatility

• Integration delays: Any IT hiccups or customer attrition could pressure NPA ratios, which inched up to 0.92% of assets.
• Interest rate cuts: A Fed pivot could compress NIMs, though FBK's focus on short-term repricing assets (72% of loans reprice within 12 months) mitigates this risk.

Investment Thesis: Buy the Dip

FBK's stock has overreacted to short-term noise. The merger's full benefits—capital accretion, margin expansion, and geographic diversification—are just beginning to materialize. With TBVPS growing at 11% annually and a fortress balance sheet (14.7% Tier 1 capital), the stock's current valuation offers a margin of safety.

Actionable advice: Accumulate FBK at $45–$48, targeting a 12-month price target of $55–$60 based on a normalized 1.8x TBVPS multiple. The merger's completion and Q3 integration updates could be catalysts for a rebound.

In an era of banking sector volatility, FBK's disciplined capital strategy and undervalued TBVPS make it a standout opportunity for investors with a 12–18-month horizon.